Most Recent Posts
Horse Breeders V IRS: Even The Losers Win
But litigated cases are a bad sample. Most cases settle. Unfortunately, any information on that is anecdotal, unlike the decided cases which are there for all to see. The word on the street is that cases settle for 50% (or sometimes over 80% in favor of the taxpayer) in appeals. And it is back to claiming the losses after that. But the really interesting thing is that in many of the litigated cases where taxpayers lose, they are actually winners if you take a broader view.
S Corporation Might Have Been Better Plan For Writer Karin Slaughter
The S corporation as a vehicle for authors like Slaughter is supercharged by Section 199A which allows a 20% income tax deduction for the flow through income, provided the W-2 is sufficient. Writing is not one of the specified fields like health or performing arts that is excluded from 199A for high-income people.
Assuming she does not have a team of minions writing for her she would need an S corporation so she can pay herself W-2 wages. I discuss the optimal amount here. You would absolutely not want to make the argument that she is getting paid for the brand rather than the writing since that might fall under one of the dreaded SSTB categories that don’t qualify for the deduction. The example in the regs is not a writer, but you should be able to get the ideas.
Tax Season Therapy The Tweets Of Andrea Carr CPA
Do you think it's a coincidence that Girl Scout cookies are sold during tax season? I think not . - Andrea Carr CPA The tweeting of Andrea Carr CPA was one of the high...
How To Win An IRS Hobby Loss Audit
So I have gone through 270 hobby loss decisions. The main takeaway, as I have noted, is that if you win on the first factor you win. If you lose on the first factor you lose. That is unless you are Robert Dickson. So if Terry has been thoroughly unbusinesslike remember Robert Dickson, a yacht chartering case from 1983. No separate account. Didn’t advertise enough. Factor 1 went to the IRS, but he won anyway.
When it comes to the business plan and consulting on how to get money, there are quite a few decisions you can use to argue your way out of a problem, but Susan Crile is one of the best. The case is one in which we see that a business plan can be displayed in action without writing it down
IRS Hobby Loss Regulation – Goofy Says Judge And I Agree
Originally published on Forbes.com. Having a judge refer to an IRS regulation as "goofy" is not a good thing. Fortunately, it has only happened once and not that long...
Tax Advisers Are Too Afraid Of The Hobby Loss Rules
Section 183 was enacted as part of the Tax Reform Act of 1969. Regulations were issued in 1972. They are mostly unchanged. One of the earlier people to run up against Section 183 was Maurice Dreicer. In 1979, the Tax Court upheld deficiencies totaling $30,000 for 1972 and 1973. (You could call that $180,000 in today’s dollars).
Mr. Dreicer’s “business” was traveling around the world and going to fine restaurants which would endeavor to serve him the”perfect steak”. He was planning a book titled My 27 Year Search for the Perfect Steak — Still Looking. He was already a published author with The Diner’s Companion.
Although it ended up not doing him any good Dreicer’s winning appeal to the DC Circuit set an important precedent.
We perceive no basis for disturbing the Tax Court’s finding on the nature of the undertakings generating the losses for which deductions are sought. We do not accept, however, the legal test that the court employed in ruling on deductibility. We hold that a taxpayer engages in an activity for profit, within the meaning of Section 183 and the implementing regulations, when profit is actually and honestly his objective though the prospect of achieving it may seem dim . Because the Tax Court applied a different standard, we reverse and remand for redetermination of Dreicer’s deduction claims. (Emphasis added)
Denial Of $33M Deduction That Yielded $2M To University Of Michigan Upheld On Appeal
The Tax Court went with zero deduction, but not based on the sham theory. On its own, the Tax Court came up with failure to substantiate based on that missing number on Form 8283. There is something really satisfying with that result. All these smart people with complicated math stuff planning the deal and attacking it and the Tax Court blows it up with what would be a review comment that a senior accountant with three years experience would have given an associate. RTI. (Read the instructions).
Don’t Try To Create Tax Basis With Journal Entries
The lesson is a discouraging one for accountants. I went digging in PACER and found the schedule that Meruelo’s accountant prepared and they are really good work. A good bit of effort must have gone into them. But they end up meaning nothing.
Those of us who think in double entry might believe that Meruelo should have gotten his basis and been allowed the loss. Throughout most of my career, I would have thought there was no problem. But years of reading decisions like this have caused me to conclude that the only people impressed by an accountant’s entries are other accountants .
Reilly’s Fourth Law of Tax Planning – Execution isn’t everything, but it’s a lot. Here we have an exception. Execution actually was everything. If the money that Meruelo purportedly loaned to Merco had actually passed through his hands and been recorded as a loan or a distribution to him, he would have had his basis and his loss
Reflections On Technology – By Michael Schaffner
One of the great benefits of the Civil War Sesquicentennial was some of the people I met. One of them was Michael Schaffner whom I met at the penultimate event the...
Malware Attack Paralyzes Tax Businesses Throughout The Country
On a more serious note, I think we should reflect a little on how vulnerable we have made ourselves from overreliance on technology. When I was a hotel night auditor, the monstrous bookkeeping machine I wrestled with had a hand crank back-up so I could work it without electricity. It never came up, but with a flashlight, I would be able to have the bills ready at checkout time during a power failure.
The military is taking this problem very seriously. Naval officers are now being trained in how to do celestial navigation. It had become passe in the nineties, but fears about the vulnerability of GPS to either hacking or actually shooting down the satellites now makes it a thing. Having a carrier battle group not be able to figure out where it is is much scarier than having a bunch of tax accountants not able to do returns. Even if it means somebody will not make his charge hour bonus.